Homework 1

Omar Trejo - 119711 Economa Internacional I

Exercise 1
Plot the ratio of Merchandise exports to GDP, ratio of Merchandise imports to GDP, and ratio of Merchandise trade to GDP on the same graph. How does the impact of NAFTA show up in this graph?

Figure 1: From Figure 1 we can observe that from 1994 to 1995 Merchandise trade had a 58% growth (1994: 34%, 1995: 54%, then growth % = .54 / .34 - 1) which 1

is very impressive. From 1994 to 2012 the growth percentages for the ratio of Merchandise exports to GDP, ratio of Merchandise imports to GDP, and ratio of Merchandise trade to GDP were 128%, 68% and 88%, respectively. This shows that NAFTA has helped us increase our exports much more than our imports so far. This clearly helps our economy at an aggregate level and helps support our trade balance. However, this lacks internal analysis of the economy which is also important to understand the economic dynamics.

Exercise 2
Compute the average of the three ratios above for 1960-1993 and 1994-2011. How large is the 1994-2011 average relative to the 1960-1993, i.e. How has the importance of merchandise exports, imports and trade changed between these two time periods? Merchandise Exports / GDP Imports / GDP Trade / GDP Avg. 1960-1993 (1) 9% 10% 19% Avg. 1994-2011 (2) 26% 28% 54% Ratio (1)/(2) 33% 35% 34%

From the data presented above we can observe substantial improvements in the averages between 1960-1993 and 1994-2011. The averages of the ratio of Merchandise exports to GDP, ratio of Merchandise imports to GDP, and ratio of Merchandise trade to GDP grew by 188%, 180% and 184%, respectively. This can be explained from various aspects such as NAFTA, overall globalization which helps international trade and others. However, its safe to say (given what we showed in exercise one) that NAFTA had a profound impact on these growth ratios.

Exercise 3
Compute the Exports of services, Imports of services, and Trade of services. Plot Exports of services to GDP ratio, Imports of services to GDP, and Trade of services to GDP. Explain how export, import and trade in services relative to GDP has changed over time? What does this tell you about importance of services in Mexicos trade with the world? Is there something odd going in the graph? 2

The computed values will not be completely shown due to space requirements. However we will present the data with increments of 10 years from 1960 to 2010, and also show 2012 (the last year for which we have data). Services Exports / GDP Imports / GDP Trade / GDP 1960 3% 3% 5% 1970 4% 3% 7% 1980 1% 2% 3% 1990 3% 3% 6% 2000 2% 2% 4% 2010 1% 2% 3% 2012 2% 4% 6%

Figure 2: From Figure 2 we can observe a small downward tendency in the exports, imports and trade of services. It seems as we are trading less and less services with the rest of the world. We can observe an odd behavior between 1980 and 1988 where we nd a very big drop in all three measures, possibly related to the nationalization of the banking system in 1982, and its later re-privatization in 1990. Another odd thing in Figure 2 is that in 1988 we observe negative percentages. This means that our service exports, imports and trade actually shrank. However we can observe a very big comeback after the re-privatization of the bank system, and an even better one in 2012. This could indicate an upward tendency from now on. But there are many variables that remain to be explained around this such as the big reforms that are taking place right now in Mexico. 3